Congress Leaders Reach $1.59 Trillion Deal

Paresh Jadhav

12 months ago

A bipartisan agreement reached Sunday will enable Congress to craft the necessary appropriations bills before funding for veterans programs, transportation, housing and the Energy Department expire Jan 19 and Feb 2 respectively.

The deal aligns discretionary spending levels with a $1.59 trillion statutory cap set by last year’s debt ceiling agreement and allows tens of billions in additional savings through side deals.

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What It Means

House Speaker Mike Johnson announced in a letter sent out Sunday that leaders have reached an “arduous compromise to unlock FY 2024 topline numbers and allow appropriations committees to negotiate and pass annual spending bills”. That figure, which conforms with a statutory budget cap, amounts to $886 billion for defense spending while only $704 billion went toward nondefense spending. Furthermore, this agreement also reverses COVID-19 student loan repayment pauses, claws back about $10 billion of additional IRS funding granted last year under Inflation Reduction Act provisions and tightens work requirements on social welfare programs.

Senate Majority Leader Chuck Schumer and House Democratic Leader Hakeem Jeffries applauded the agreement, noting it would give lawmakers more time to draft spending bills before funding runs out Jan 19 for some agencies and Feb 2 for others. However, this accord still faces significant opposition from far-right House Freedom Caucus members who pledged their opposition by demanding deeper cuts.

How It Averts a Government Shutdown

Budget negotiations between congressional leaders have resolved the threat of government shutdown that threatened government operations and millions of workers. A deal was reached after weeks of intensive talks ahead of Congress’s return from recess, according to news reports.

This agreement aligns 2024 spending caps with an earlier deal negotiated between President Biden and then-Speaker Kevin McCarthy last year despite strong opposition from conservatives, as well as permitting $70 billion of side deals intended to mitigate any sharp cuts imposed by spending caps imposed by domestic agency budgets.

House Freedom Caucus Republicans have agreed to back down from demanding major concessions from Democrats in exchange for short-term funding that includes no “poison pills”, keeping defense and other programs funded at current levels – something the House still needs to decide upon.

House Appropriations Committee

Congress only has weeks remaining before it must act to avert a possible shutdown, yet reaching an agreement over spending levels alone won’t ensure success in their fight to avoid one.

President Joe Biden and Democratic Senate Majority Leader Chuck Schumer reached an agreement that allows House Appropriations Committee leaders to develop a budget proposal for next fiscal year that meets pre-established spending caps while offering concessions to conservative lawmakers, such as $69 billion for adjustments and clawing back over $30 billion in unspent Covid-19 aid money that had already been spent.

But the agreement reportedly doesn’t meet a number pushed by hardline conservatives in the House Freedom Caucus, who wanted to limit how funds can be spent for domestic programs like veterans care and nutrition assistance through accounting maneuvers – leading to total nondefense funding topping out at an estimated $772.7 billion, according to one Democratic aide.

What’s Next

This deal reduces the odds of government shutdown but doesn’t ensure one won’t occur. Congress must pass funding bills or pass an interim resolution before agencies and programs run out of money Jan 19 and Feb 2.

Senate Majority Leader Chuck Schumer and House Speaker Mike Johnson’s aides report they are continuing negotiations on each of the 12 annual spending bills – an effort expected to last several weeks.

But if lawmakers do not reach an appropriations deal by Feb 2, the administration would need to operate under a stopgap bill that maintains 2023 levels for both nondefense and defense discretionary spending, which would amount to an across-the-board cut of one percent in both categories.

Congressional leaders hope the $1.59 trillion figure agreed upon by negotiators will allow them to avoid this scenario. The deal includes concessions demanded by Republicans in order to protect domestic agency budgets from immediate cuts; such as speeding up $10 billion of cuts to IRS and clawing back approximately $6 billion of unspent Covid-19 funds.